Pay-For-Delay Ban Dropped From Health Care Reform

from the of-course dept

While plenty of folks are still digging through what the new health care reform (really medical insurance reform) law really means (and it's likely not what you hear most of the TV pundits talking about), it's unfortunate to hear that the provision to ban "pay for delay" schemes from pharma companies was removed. We talked about these sneaky deals last year. Basically, big pharma companies threaten (and often sue) the makers of generic drugs, just before a drug is about to go off patent. There is no actual patent infringement as the basis of the lawsuit, but the lawsuit acts as a negotiating ploy, with part of the "settlement" being an agreement from the generic drug maker not to enter the market. It's a blatantly anti-competitive move. Basically, the pharma companies leverage their gov't granted monopoly to build up a bunch of cash, which they can then use to pay off potential competitors in order to keep that monopoly for years past the expiration of the patent.

It makes drugs much more expensive for everyone while being a clearly anti-competitive practice. So it seemed like a good thing that the health care reform bill was supposed to ban it. Until... of course... it was removed days before the bill was approved. No matter what your take is on health care reform, it's hard to see any reason to allow this kind of practice to continue, and even if it wasn't included in the the health care reform bill, and isn't included in the current patent reform bill, it seems like there's no reason the FTC can't just step in and make the point that this is blatantly anti-competitive. The FTC knows this is a problem -- and has even said that these sorts of deals have cost US citizens $3.5 billion per year in higher drug costs.

Sounds like business as usual. The only real solution is to make every aspect of health care non-profit. Non-profit hospitals, non-profit insurance companies...etc. It makes no sense to have an insurance company which is motivated by profits, deciding whether or not to approve a life saving procedure on the basis of how much they will lose by saving someone's life.

My guess is it was more shrewd political manoeuvring rather than pandering to lobbyists (though the Obama administration is certainly guilty of that in other areas). Just look at how difficult it has been to beat the healthcare insurance lobbyists, add pharma lobbyists into that equation and you have an impossible situation where the bill would have been dead in the water before it could even hit Congress. However with the bill as it is, pharma lobbyists are actually in favour of it, and have been paying for advertisements in many areas, something which has no doubt helped this bill come to fruition.

Pharmaceutical companies practices are vile, however in this case I can see why Obama didn't try and reform every broken aspect of US healthcare, and instead decided to focus on a small part of it. By getting this through it opens to the door to later improvements, and even though there are a lot of questionable things in the bill I think the overall effect will be positive.

Non-Profit ??? Horrible Solution

The only time a non-profit type setup can work is if there is competition. The parts of the government that do work well do so when there is competition in place. Just like a business/free market, no competition means no real interest in improving or providing better service. Just because it is health care doesn't mean the basic rules don't apply because we want/wish for a utopia that ignores human nature.

The real issue with health care is the paradigm that insurance is necessary to pay for non major events. We don't pay for oil changes, gas, tires and so on with car insurance money, but for some reason that is exactly what we do with health insurance?

To me, insurance (any kind) is to provide for major expenses that could bankrupt me or significantly effect me. When did having a doctor's visit become something that we wanted insurance companies to pay for??? After all, why would I pay someone else to pay my bills - they aren't going to do it for free so ultimately I just pay more.

With the current system and now the reformed system as well, the majority of doctors are paid by insurance companies for even the minor stuff. Guess who their real customer is - it isn't you, it is the insurance company. When you don't know how much something costs and aren't directly paying for it is it so hard to see why costs have gotten out of control?

IMHO - to fix health care, put the purchasing power back in the hands of the people (i.e. stop using insurance for your oil changes - in fact, require minimum deducatables that are tied to a percentage of your AGI), and provide a better safety net for those that are in extreme situations, reform the low hanging fruit of various competition issues with the insurance companies, eliminate any unnecessary expenses in health care (regulation expenses, liability, etc.), and where possible increase competition through patent and copyright reform.

Instead we are one step away from socialized medicine and much higher taxes.

As an aside, how many sub 30's year olds do you think are going to buy insurance when the potential delta cost between the tax penality and insurance will be in the $4k to $6k range? Especially with the no pre-condition clause in effect. Insurance companies are going to be forced to insure higher risk people and have relatively small number of low-risk folks added in at the same time. Add in a ton more regulation and you think costs are going to go down? The President and the Progressive Democrats aren't stupid - they know this ... the real question is why would they want to destroy our system instead of fixing it?

And whereas the US spends something like 17% of its tax revenue on healthcare, and healthcare costs every US citizen $7000 per year regardless of whether they are covered or not. I would say a socialised system such as the NHS here in the UK is actually preferable to yours, we only spend around 9% of tax revenue on healthcare, and it costs around $3500 per year for every citizen, and we have universal coverage. The best healthcare systems in the world are either socialised or government mandated. The US currently has neither, but is slowly working its way towards a government mandated system (NOT socialist), which would be a major improvement for US citizens.

Re: Non-Profit ??? Horrible Solution

Non-Profit != no competition.

The Red Cross pays an awful lot to advertise because they compete for every charity dollar they get. Many charities publish their dollar efficiency (percentage of overhead versus actual charity work) as a means to help the public (for who's attention the charity competes) decide where to put their charity dollars.

As someone who has interest in a non-profit (rehab) hospital who serves the public without regards to payment ability, we compete for patients. More importantly due to gov't regulations on Medicaid/Medicare payouts, we compete for a very specific ratio of patients (Medicare versus non-Medicare).

In addition to advertising/competing both for patients and for (charity) dollars, we also compete for quality doctors, nurses, therapists, etc... So your core hypothesis is blown.

"Basically, the pharma companies leverage their gov't granted monopoly to build up a bunch of cash, which they can then use to pay off potential competitors in order to keep that monopoly for years past the expiration of the patent."

Any provisions in these types of agreements limiting the sale of generics must end by the date the relevant patent expires.

Re: Non-Profit ??? Horrible Solution

Good thinking behind your comment. Thank you.

Couple of quick thoughts:
1. My sister lives in Calgary AB, Cananda. She has told me for a few years now about the terrible health care there. She has had crazy long wait times to see doctors about nearly routine problems with her children. Her biggest fear is with the emergency medical system. You see, there is a shortage of doctors and nurses (because they are underpaid - according to her nurse friend). Because of this shortage there is not enough staff, often times, to triage and admit new patients in the ER. To protect the patients, their is a rule that the ambulance crew must stay with the patient until admitted. This ties the ambulance and crew up, for hours at a time. All this leads to long wait times for emergency ambulance help.
Pull the thread on this problem and it's obvious that the lack of free market competition, and the ability to charge market rates for care, so as to pay for proper staffing is at the root (or close to it anyway).

2. After England went to the single payer system the number of patients treated dropped by 11%. However, the number of employees working in the system increased by nearly 50%. Most of these new employees being middle managers (bureaucrats).

3. All this talk about business being "too big to fail", is interesting. I think that we should look at any health care reforms in the same way. Let's not play with fire. Let's the states try different systems and ideas to see if a certain system works better than others. This is too costly an experiment to pretend to try on the entire nation at once. WAY to big to fail.

Re:

I think that in the past hospitals were non profit, as were many clinics. Is it coincidence that the astronomical health care cost increases began about the same time that hospitals and clinics became for profit?

Re: Non-Profit ??? Horrible Solution

We don't pay for oil changes, gas, tires and so on with car insurance money, but for some reason that is exactly what we do with health insurance?

Except, it isn't. That's regular upkeep. We don't expect (with a few exceptions, mainly for women) health insurance to pay for our regular physical upkeep. It doesn't pay for food, exercise club memberships, child daycare or haircuts, for example. It mostly only pays for unforeseen misfortune.

To me, insurance (any kind) is to provide for major expenses that could bankrupt me or significantly effect me.

A broken window or taillight on my car may not be a "major event" likely to bankrupt me, but my insurance pays for it anyway.

As an aside, how many sub 30's year olds do you think are going to buy insurance when the potential delta cost between the tax penality and insurance will be in the $4k to $6k range?

How many people without children do you think like paying school taxes?

"As an aside", as you put it, we're already spending enough in Iraq to provide health care for for every single American currently without it in the US. Why do you think those "sub 30's year olds" would be willing to spend that money on the Iraq war but not on their parents? Because it has a better entertainment factor?

Re: Re: Non-Profit ??? Horrible Solution

1. My sister lives in Calgary AB, Cananda. She has told me for a few years now about the terrible health care there. She has had crazy long wait times to see doctors about nearly routine problems with her children. Her biggest fear is with the emergency medical system. You see, there is a shortage of doctors and nurses (because they are underpaid - according to her nurse friend). Because of this shortage there is not enough staff, often times, to triage and admit new patients in the ER. To protect the patients, their is a rule that the ambulance crew must stay with the patient until admitted. This ties the ambulance and crew up, for hours at a time. All this leads to long wait times for emergency ambulance help.

Wow, my brother lives there and he tell me just the opposite. He usually gets in to see a doctor much more quickly than I can get an appointment to see mine in the US, and when he was recently injured in a traffic accident they took him straight to the hospital. He didn't have to prove insurance, pay for the ambulance, emergency room, or anything like that and they saw him right away. When another friend of mine in the US (who is too poor to afford insurance and has bad diabetes) recently had to call an ambulance to take him to the hospital (diabetic complication) they charged him almost $1000 just for the ride and have now sent the lawyers after him because he can't pay. My Canadian friend can't believe it.

Re: Re: Non-Profit ??? Horrible Solution

>> In addition to advertising/competing both for patients and for (charity) dollars, we also compete for quality doctors, nurses, therapists, etc... So your core hypothesis is blown.

Most government programs are geared towards non-competition. In your case, that obviously isn't the case and that was actually my point which ironically it appears that you helped to prove (thank you).

There are also other examples of where government competes and tends to do fairly well. In areas where it controls or has a monopoly on the market is typically where the issues come into play as being a bad deal for the consumer.

History has shown that the government in general doesn't setup an infrastructure that encourages competition at a pure free type market level. Instead, decisions are made based on politics which usually go against the market's will. This health care reform is the worst as it keeps the free market system but allows politicians to make political decisions and ignore the realty of the market.

Obviously, most of this comes down to your core biases of various entities (i.e. government / business). For me, I just believe that individuals voting with their dollars is far more efficient and ultimately provides better services than one that is controlled by politicians. The free market is harsher and more direct, but that is what makes it work so well in the end.

The politics and politicians wrapped themselves in warm fuzzy talk about how they are doing what is right for the people and that free market system is just way too brutal. It sounds soooo good, but it goes against human nature. You can wish that we were different, but to design a system based on your wishes instead of reality is doomed for failure.

We all know deep down though that a free market will eventually self-correct despite the politics and in many cases the correction is made worse by politics in play and not better.

As an aside, what I don't understand and maybe this is the business owner in me, but how could anyone want to give control of their core decisions to a politician and government bureaucrats? Why does the government think they can force me to buy health care? Why isn't it my decision?

When I go to the doctor I want to hand him/her the cash - I want him to know that I'm the customer and I'm the one that has to be happy in the end. In government/insurance run world, you are human cattle that your master/owner is paying to ensure is kept in good health with the hope that you will keep producing (tax revenues).

To me, we all get caught up in the emotion of health care, but lose site that the government's job is for the big stuff (military, NASA, etc.) that can't be handled at a local and/or free market level more efficiently. True health care reform is about ensuring that we don't ignore those truly in trouble, but at the same time don't destroy one of the best health care systems in the world or diminish what makes it great - a free market.

Re: Re:

"I think that in the past hospitals were non profit, as were many clinics. Is it coincidence that the astronomical health care cost increases began about the same time that hospitals and clinics became for profit?"

It's the survival of the fittest. That's what makes America great! If you're the weak dog on the sled team, why shouldn't you be cut up and fed to the others? It only makes sense to me.

Of us reasonable, regular folks, is there ANY of us that would be against removing or drastically decreasing these drug patents altogether? I'm a conservative, and PATENT reform would be at the top of my list of ways to fix health care. (Of course, from what I know so far, the new law is pretty much the opposite of what I would have wanted anyways... but I'm not going to bother researching until the Senate revisions are pushed through and I can see it in total... but point being there are a crapload of ways to cut healthcare costs for everyone by doing the opposite of what was passed...)

Re: Re: Re: Non-Profit ??? Horrible Solution

The politics and politicians wrapped themselves in warm fuzzy talk about how they are doing what is right for the people and that free market system is just way too brutal. It sounds soooo good, but it goes against human nature.

Ahh yes, don't you just hate that all that moral crap?

You can wish that we were different, but to design a system based on your wishes instead of reality is doomed for failure.

Survival of the fittest, that's what we need, I say. We don't need no stinkin' government: total anarchy is the way to go. Let things sort themselves out and those left standing in the end will be those most deserving to go forward. It's the law of nature.

As an aside, what I don't understand and maybe this is the business owner in me, but how could anyone want to give control of their core decisions to a politician and government bureaucrats?

I hear you. I'd be a very rich man today if it were for the government telling me that I can't do certain things. I wish they'd keep their nose out of my business.

Why does the government think they can force me to buy health care? Why isn't it my decision?

Or anything else? After all, that's all taxes are: the government taking MY MONEY and spending it for me. There should be NO TAXES, period! I'm perfectly capable of deciding for myself what I want to spend MY MONEY on, thank you.

True health care reform is about ensuring that we don't ignore those truly in trouble...

Ignore them? Hell, no! Run 'em out of town! We can't afford that kind of crap.

Re: Re: Non-Profit ??? Horrible Solution

>> A broken window or taillight on my car may not be a "major event" likely to bankrupt me, but my insurance pays for it anyway.

I'm not sure what insurance you have, but mine doesn't and I definitely wouldn't pay the extra premiums for the coverage. All of our cars have a $1,000 deductible. Why would I want to cover expenses that I can handle. I far rather put the money saved on premiums into a savings account which is exactly what we do in our family.

>> Except, it isn't. That's regular upkeep. We don't expect (with a few exceptions, mainly for women) health insurance to pay for our regular physical upkeep. It doesn't pay for food, exercise club memberships, child daycare or haircuts, for example. It mostly only pays for unforeseen misfortune.

In the new government plan everyone would be ENTITLED (love that word) to yearly check ups? What else are we entitled to? If we smash our thumb and have to go to the emergency room should that be covered? The purpose of insurance isn't to win the lottery every time a little thing happens, it is to ensure that you can handle the big stuff where pooling money together and spreading the risk makes sense. Paying higher premiums to have your tail light fixed, windshield replaced doesn't make market sense as the cost to insure everyday events is nothing more than effectively adding a surcharge/tax to those costs.

I don't know about you, but I wouldn't want to pay insurance for my sprinkler system, pool pumps, TV, DVD/BR Player, PC, and so on? Why, because in the end having an extra party will add a layer and cost. For a $100k heart attack, it makes sense, for $1k to have my thumb looked at after hitting it with a hammer, not so much.

By the way, one of the reasons that prescriptions drugs are so expensive is because we get insurance involved. If people had to pay the true cost, the supply/demand would adjust to market pressures. Do you somehow think that Government is just going to pay whatever it takes to get you whatever drugs you want? That sort of utopia doesn't exist. Money is money, markets are markets, and politics are politics. Except now instead of the drug makers responding naturally to market pressures, they withhold product, make backroom deals, and black markets will develop in place of the free market. Quality will decline and market/consumer based incentives will disappear.

>> How many people without children do you think like paying school taxes?

Most folks would agree that property/school taxes are a good thing for society. However, the problem with most K-12 school programs is the lack of competition for the schools, teachers, and programs in place. Why is it that vouchers are cool for health care now but they are pure evil for schools?

I'm not against overhaul of the insurance system and I'm not against taxes to help those less fortunate. What I am against is a system that perverts the free market and them blames the free market at the same time for not being able to live up to unrealistic expectations.

There ain't no such thing as a free lunch and while socialistic goals sure sound warm, fuzzy, and would make for a perfect utopia, the real world reality and human nature can't be ignored. While the free market may not be perfect, in the end it will provide better care and to more people than the alternatives.

Re: Re: Re: Non-Profit ??? Horrible Solution

I'm not sure what insurance you have, but mine doesn't and I definitely wouldn't pay the extra premiums for the coverage. All of our cars have a $1,000 deductible.

It's apparently not whatever craptastic insurance you have as I have only a $100 deductible. Maybe you should shop around a little more next time.

The purpose of insurance isn't to win the lottery every time a little thing happens,

What are you on about? How does that work? I'm not talking about insurance fraud, so you can put that straw man away.

I don't know about you, but I wouldn't want to pay insurance for my sprinkler system, pool pumps, TV, DVD/BR Player, PC, and so on? Why, because in the end having an extra party will add a layer and cost.

So you never bought anything with a warranty, eh? Because if you did, then part of what you paid for was a type of insurance. But you would never do that. And if that's your personal choice, then that's okay, but some people would. Now I don't usually buy extended warranties on things, but some people do. That's their personal choice and that's okay too.

By the way, one of the reasons that prescriptions drugs are so expensive is because we get insurance involved. If people had to pay the true cost, the supply/demand would adjust to market pressures.

Drugs are so expensive because the government interferes with the supply side of the equation by giving the drug companies monopolies. It's not because we have insurance, but because we don't have a free market.

Most folks would agree that property/school taxes are a good thing for society.

Congratulations on seeing the point. Most folks also agree everyone having health care is a good thing for society. So what's your point? That you now agree with me? Thanks.

Re: Re: Re: Re: Non-Profit ??? Horrible Solution

I'll come out and play for another round ;)

>> It's apparently not whatever craptastic insurance you have as I have only a $100 deductible. Maybe you should shop around a little more next time.

Wow - Really? That is what you got out of what I wrote? Did you read any of it? Seriously? I said that I don't believe in paying higher premiums to have someone sweat the small stuff. Everyone has their comfort zone, but I have a hard time imagining spending the sort of money that owning a vehicle requires and limiting my liability to $100. Maybe you didn't realize that insurance is cheaper with a larger deductable ???

>> So you never bought anything with a warranty, eh?

I've never paid for an extended warranty and never would.

The underlying issue is our country is having government/politicans decide what sort of insurance we should be forced to carry, I have a major issue of having someone else's comfort zone forced on me or worse yet having to subsidized someone else's comfort zone.

>> drugs ... It's not because we have insurance, but because we don't have a free market.

The reason we don't have a free market is because of the insurance companies. A free market requires individuals to vote with their dollars to be truly effective. The insurance companies put a distoration field around health care.

>> What you now agree with me?

My underlying point is that I don't believe taxes or government programs are bad. Just as I've said multiple times in my posts today that when the government guides the free market and we start paying for the basics directly, then and only then we will have a truly cost/market efficient health care system. Shifting the money to the insurance companies or the government or worse yet both doesn't provide a better system, but a worse one that wastes precious limited resources which creates a bunch of other issues...

Re:

Re: Re: Re: Re: Re: Non-Profit ??? Horrible Solution

Wow - Really? That is what you got out of what I wrote? Did you read any of it? Seriously?

If you didn't mean what you wrote, perhaps you shouldn't have written it.

Maybe you didn't realize that insurance is cheaper with a larger deductable ???

Maybe you don't realize that it would be cheaper yet, statistically speaking, to forgo anything but the minimum required liability insurance?

I've never paid for an extended warranty and never would.

If you bought anything with a warranty then it was factored into the price. But you've never done that, right?

I have a major issue of having someone else's comfort zone forced on me or worse yet having to subsidized someone else's comfort zone.

Or the public education of their children, or their police protection, or their fire protection or any number of other public services, I suppose.

Just as I've said multiple times in my posts today that when the government guides the free market and we start paying for the basics directly, then and only then we will have a truly cost/market efficient health care system.

Re:

The people who are against this bill do a disservice to their arguments by labeling it socialism, this is nowhere near socialism and seems to be more just adding regulation to try and fix a broken system.
I live in Czech Republic where there is a mix of Social systems with private enterprise, and although it has it's faults I actually think it's better than the NHS style system of government run Healthcare - whereas either system is better than the US system.

Re: Re: Re:

Looks like the anarcho-capitalist party wins out again. Really, there is nothing Republican about them. Its like a disgusting mix of the old russian politboros and oligarchy. The Republican party is so extreme these days, that they can't even be labeled right-wing extremists.

Re: What one needs to remember is

Aren't most bills these days written by the lobbies, PACs or whatever they like to be called? This would explain why congress has no idea what is actually in the bills that shuffle through the hallways.

Re: Re: Re: Non-Profit ??? Horrible Solution

I've found stories about Canada hit and miss. It seems to be more about personal experience.

For example, an old boss of mine moved down here because his wife had a long wait time for cancer treatments up in Toronto. It wasn't the only reason but was part of the drive to come to the US. He said that mostly healthcare is easy to obtain unless its something expensive or something that has limited specialists in that area.

Compare that to another friend who has been a Canadian resident for the past 8 years (was US-born) and has prostate cancer. He's had no issues getting timely appointments and great medical care.

In my opinion, no healthcare system is perfect. Even the best healthcare system still has people who run it. Get a bad case-worker? You might be in for a rough ride. Get a good case-worker and it might be smooth sailing.

A good healthcare plan can do a lot to improve both the economy and general well being of citizens if done right. What does done right mean? I have no clue. :)

Re: Re: Re: Non-Profit ??? Horrible Solution

By the way, one of the reasons that prescriptions drugs are so expensive is because we get insurance involved. If people had to pay the true cost, the supply/demand would adjust to market pressures. Do you somehow think that Government is just going to pay whatever it takes to get you whatever drugs you want? That sort of utopia doesn't exist. Money is money, markets are markets, and politics are politics. Except now instead of the drug makers responding naturally to market pressures, they withhold product, make backroom deals, and black markets will develop in place of the free market. Quality will decline and market/consumer based incentives will disappear.

Sort of. There is a lot more going on in Drug pricing than you think. I've worked in Biotech and Pharmacy for around 10 year or so (disclaimer, only in IT) and I've heard, seen and spoken with various people in the know over the years to get an overall idea that insurance isn't the exact reason for high RX prices.

From my (limited) experience, what I believe (and witnessed) has caused the price to go up is as follows;

.Research plays a huge part in drug costs for the first year or so. The majority of specialty (the sector I'm in) meds like Cancer, HIV and various chronic disease treatments are insanely expensive to produce. In the majority of cases for specialty, drug companies loose money in the first year and start gaining (depending on how good the drug is and how the side effects are) profit in the 2nd to 3rd year.

.corporate espionage, I've only seen this in one case where a large pharma company poured millions into research for a cancer treatment and a general generics company stole the formula and patented it prior to the original company patenting the drug. The company that stole the formula managed to get away scott free and original company ended up loosing millions poured into research.

.fda denied drugs and abandoned research, these are drugs the companies spent millions on and either came up with a drug that did not pass fda approval or eventually gave up due to bad side effects, high death rate, etc.

Now that's not to say back-handed deals, forumulary deals, lock-outs and what-not do not effect drug prices. I'm just saying that there are other factors that effect price and the 'naughty stuff' isn't the sole reason (or in some cases, the only reason) drug prices are expensive.

I've seen enough dirty deals to make me sick. I'm also one to believe that a PBM owning a Specialty pharmacy (or any pharmacy for that matter) is a HUGE conflict of interest. I've had personal experience in this and its amazing how badly the patient can get screwed.

One of the more positive things I've seen in our for-profit health-care system is Patient Assistance Funds. Where either community or drug companies fund non-profit companies that help pay the patients co-pay if they cannot afford the medication. Of course it has its own issues but for the most part seems to be in favor of the patient.

Re: Re: Re: Re: Non-Profit ??? Horrible Solution

One more thing, I know you didn't say exact. You said 'one of the.' I don't want to seem like I'm putting words in your mouth nor am I here to argue your point of view on the matter. I just thought now would be a good time to post my views and experiences. I could be totally way off in what I've seen.

@freedom

Well said! Good job keeping your cool and not being baited into a sarcastic flame war.

I agree one of the biggest problems with respect to our health industries today is that the consumer and the customer are two different groups.

The consumer is the person who uses a good or service, the customer is the person who pays for it. And when the consumer is not the customer we get all kinds of strange behavior. Consumers consuming with no regard to the cost, or customers refusing to pay because they don't see the value.

And thank you to Mike for pointing out in his post that "Health Care" reform should be more appropriately named "Heath Insurance" reform.

Not one of the goals of this legislation was to "Improve the Quality of Care" ... all the stated objectives deal with how to pay for care. An important piece of the puzzle, but it is not the same. Health Care != Health Insurance.

Unfortunately I believe that the issues have been purposefully misrepresented with the intent to divide us (the people) and keep the arguments over moral principles and not over the detailed implementation. A detailed implementation that will, in all likelihood, not fulfill the stated moral objectives it was passed upon....

Also, who has read the bill? I keep trying but it is extremely difficult to follow...I'm no where near through it all....

Think Before You Hate Bio-Pharma

I was the lead negotiator for three deals that my BigPharma employer had to submit to FTC for inclusion in their report (released in Jan 2010) about these so called "pay for delay" deals, so allow me to provide some "fair balance".

Firstly we in BigPharma view our IP to be no different than the property that your house sits on. If someone were to come and pitch a tent in your backyard or build a house that encroaches your property line you would no doubt be pissed and try kick them off your property. Now imagine if they said I'll leave only when you prove to me in a court of law that this is your property, putting the burden of proof on you despite the fact that you paid a bunch of money for the property, spent time developing it and hold a piece of paper from the government saying it belongs to you. Clearly proving it is yours will take time, you will now be faced with significant legal expenses to prove what you otherwise believe to be true and you run the risk that the court may not agree and you completely lose your property. The decision is binary, it's a zero-sum game for you. So the notion of "settling" to mitigate the expense and risk is just smart business. Every business has settlements and in fact the courts prefer that the parties sort it out themselves. So to paint a business agreement between two parties as "sneaky" is inaccurate, unfair and simply yellow journalism.

Secondly the article says . . "pharma companies threaten (and often sue) the makers of generic drugs" . . . The same law (Hatch-Waxman) that allows generics to challenge innovator patents, also allows innovator drug companies to sue the generic w/ in 45 days in response to the generic's claim, if we feel our IP is being infringed by the generic. The fight comes to us it's not like we go out looking to pick a fight!

Thirdly, the article says "It's a blatantly anti-competitive move" . . this is plain wrong, even the FTC acknowledges that these deals can be pro-competitive which is why these deals have yet to be banned. The way most of these settlements work is that the generic ends up being allowed to enter the market months or years in advance of the innovator's patent expiry. So for example X BigPharma has a patent that expires in 2020, but in 2010 a generic makes a copy of this product and claims that it is not infringing on X BigPharma's patents (the tent in your backyard), X BigPharma sues, but remember it's zero sum game so X BigPharma's options are a) fight and win = patent until 2020 or b) fight and lose = patent falls in 2010 and lose 10 years of sales. If it is 50/50 that you'll win, then "settling" is smarter business and BigPharma agrees to let the generic enter the market under a license to the valid patent in 2015. That is 5 years BEFORE our patent would've expired which is PRO-COMPETITIVE.

At the end of the day, unfortunately the geniuses in Congress (most of whom have never worked a day in the private sector) have created a system that encourages generic firms (most of whom are foregin based entities the top generic firms are not US companies - Teva-Israel, Sandoz - Swiss, Ranbaxy-Indian, Dr. Reddy's -Indian)to undermine the propert rights of US based R&D companies. Last time I checked the righ to private property was afforded and protected by the US Constitution. This system forcex US based research driven pharma companies into a game of Russian roulette vis a vis our patents and sales. In fact it's common industry knowledge that many of these Indian generic firms lob a patent challenge with the end game being a settlement. When I was working on our deals I always said I it felt like we were in a stick-up.

A few final points that this author should have consider before disparaging Big Pharma . .

a) regarding prices in the US. I agree they are higher here than in the rest of the world and that's because other governments impose price controls on drugs, setting the price well below market often at a barely break even for us. This means Big Pharma needs to recoup it's costs somewhere so it falls onto the backs of the US - as an American this pisses me off. Particularly when data show that the per capita GDP of the OECD countries supports pricing much higher than they currently have. Why aren't Americans outraged by the fact that we are footing the R&D bill on behalf of the rest of the world? Why don't we hear calls for "No more European free riders". What needs to happen is that the US price has to come down and the ROW price MUST come up!
b) I find it so ironic that Democrats rail against the off shoring of US jobs, but simultaneously deify generics and villain-ize Big Pharma. Where do they think generic drugs are manufactured?? I'll tell them . . .any where but the US. The number of technolgoy and manufacturing jobs that have been "off shored" to the generic industry is phenomenal and sad!

c) Bio-Pharma is one of the last bastions of US R&D prowess and it is being hollowed out by bad legislation. The author should ask himself where will the next generation of antibiotics, anti-cancer therapies, etc. come from? Generic firms do not innovate . . they just copy Bio-Pharma's innovative technology and make it in low cost jurisdiction. Competitiveness is all about innovation and BigPhram knows this . . . however if we can't afford to innovate or if we do innovate but we don't get the right protection for that innovation then the frontiers of medicine will not continue be pushed forward. Which will be catastrophic for all of us!

Re: Think Before You Hate Bio-Pharma

Firstly we in BigPharma view our IP to be no different than the property that your house sits on.

Well, there's your first problem right there: it isn't the same at all.

This means Big Pharma needs to recoup it's costs somewhere so it falls onto the backs of the US

What a load of bull: that isn't the way economics work at all. Sellers get the best price they can in the marketplace, they don't try to just "recoup their costs". However, that *is* a famous big lie that dishonest sellers sometimes try to trout out in an attempt to placate buyers. Congratulations on showing your true colors.

Re: Think Before You Hate Bio-Pharma

Firstly we in BigPharma view our IP to be no different than the property that your house sits on.

That's a big problem, because it's not accurate at all. Property rights are to determine ownership of a scarce resource. Patents are a privilege, a monopoly right granted to a firm as incentive. It is not a property right at all.

If someone were to come and pitch a tent in your backyard or build a house that encroaches your property line you would no doubt be pissed and try kick them off your property.

Yes, because they are using up a scarce resource. Not the same thing at all. At all.

So to paint a business agreement between two parties as "sneaky" is inaccurate, unfair and simply yellow journalism.

Not at all. It's incredibly accurate. You negotiated a deal that blatantly raised prices on drugs and kept out competitors.

How do you sleep at night?

The same law (Hatch-Waxman) that allows generics to challenge innovator patents, also allows innovator drug companies to sue the generic w/ in 45 days in response to the generic's claim, if we feel our IP is being infringed by the generic. The fight comes to us it's not like we go out looking to pick a fight!

Oh yeah. Bullying other companies into staying out of the market for anticompetitive reasons. That "fight" comes to you. Ok.

Thirdly, the article says "It's a blatantly anti-competitive move" . . this is plain wrong, even the FTC acknowledges that these deals can be pro-competitive which is why these deals have yet to be banned.

Well, we just tried to ban them, but the PHRMA lobby is quite strong, and negotiated a deal with the White House. That's why this got dropped.

And, look, I've said before that I am against almost all claims of antitrust or anticompetitive practices, because I find that such claims are thrown around broadly with little evidence.

But in this case, it's clear as day that this is anticomeptitive. You are blatantly keeping a competitor out of the market for the sole reason of keeping your prices high.

It's sickening.

At the end of the day, unfortunately the geniuses in Congress (most of whom have never worked a day in the private sector) have created a system that encourages generic firms (most of whom are foregin based entities the top generic firms are not US companies - Teva-Israel, Sandoz - Swiss, Ranbaxy-Indian, Dr. Reddy's -Indian)to undermine the propert rights of US based R&D companies.

No, you mean, it encourages them to create competition which is good for the market, consumers and innovation...

And, again, you are wrong that it is a property right. It is not.

The author should ask himself where will the next generation of antibiotics, anti-cancer therapies, etc. come from?

Where they come from now: universities funded by gov't research.

But this whole paragraph is ridiculous. We've highlighted numerous studies that have looked at pharmaceutical firms in nations with no patents or less stringent patents, and while there are plenty of generic drugmakers, there's also real innovation, because with so much competition, they know they need to actually improve -- not for some gov't granted monopoly, but to beat the competitors in the market.

You run a business built off of abusing a gov't granted monopoly and you're so fat and happy from that that you now think that's the only way to run a business. Wow. That's sad for any real free marketer.

Re: Re: Think Before You Hate Bio-Pharma

Please explain why you think intellectual property is any different than physical property?

Regarding "recouping" costs . . . you are wrong. When an NPV is run for a development candidate, development exepenses and sales (inter alia) are included in the analysis. And develoment expenses can run into the hundreds of million of dollars. If a project is NPV negative then the product won't get developed.

Re: Re: Think Before You Hate Bio-Pharma

Mike bring the vitriol down . . .

I'd suggest you pick up a copy of Milton Friedman's "Capitalism and Freedom" and while you're at it read Hayek's "Rod to Serfdom" . . . property . . . whether tangible or intangible . . is the basis of a capitalistic society and governement's role is provide the framework for ownership.

Your point about future medicines coming from "where they come from now" i.e.government/university funded research is a nice sound bite but it is AMAZING to me that someone as educated as you believes this. The NIH and Universities do what is called "basic" research, they may identify a novel target or mechanism, but they DO NOT (and this is a fact)develop medicines. Drug development is very complicated, but simply put NIH and Universities work at the very very front end of the drug developent funnel - which also is the least costly part. Bio techs and big pharma DEVELOP the medicines . .that is they transform basic research into applicable science, and most importantly we run clinical studies (Ph 1-3) to prove the safety and efficacy of compounds. These clinical studies are where the risks are - financial and otherwise. Trust me NIH and Universities are not taking this risk on. So for taking on this risk we should be compensated. If your issue is that we "make too much money" then again I point you to Friedman and others. Limiting profit is not a capitalistic notion, and I belive the US is a capitalistic society.

Look it seems to me that for some reason you have an emotional beef with Biotech/Big Pharma which I won't be able to solve here . . . but I hope you consider some of my points before you lash out at Big Pharma again. Someday you, a friend or a family member will need a medicine and I suspect, that day you'll be glad that the innovators in BioTech and Big Pharma exist.

Re: Re: Re: Think Before You Hate Bio-Pharma

Please explain why you think intellectual property is any different than physical property?

They're entirely different. The entire point of physical property was to handle the allocation of scarce resources. With ideas, there is no such allocation issue to handle. What you have a is a monopoly, and as a (claimed) free marketeer, you must know what happens when you have monopolies.

Re: Re: Re: Think Before You Hate Bio-Pharma

Mike bring the vitriol down . . .

What vitriol? I see none in my comment.

I'd suggest you pick up a copy of Milton Friedman's "Capitalism and Freedom" and while you're at it read Hayek's "Rod to Serfdom" . . . property . . . whether tangible or intangible . . is the basis of a capitalistic society and governement's role is provide the framework for ownership.

I've read both. I have an economics background, remember. But your wrong. Granting monopolies on infinite goods has never been the basis for capitalistic society. Property rights, yes. But pretending infinite ideas are property? No. That's mercantilism. It's the very opposite of capitalism.

You don't see it, because you benefit from the system. It's time to open your eyes.

Friedman, by the way, was quite skeptical of intellectual property, and admitted that it "limits output to lower than the optimum social level." Later in life he grew increasingly disillusioned with the whole concept of intellectual property. Earlier he believed it was a tradeoff worth making, but later he came to recognize it was a problematic tradeoff and against the tenets of basic capitalism.

Your point about future medicines coming from "where they come from now" i.e.government/university funded research is a nice sound bite but it is AMAZING to me that someone as educated as you believes this. The NIH and Universities do what is called "basic" research, they may identify a novel target or mechanism, but they DO NOT (and this is a fact)develop medicines

Studies have shown that by the time the stuff is handed off to the drug companies, most of the important stuff is done. The actual value put in by the drug companies is minor compared to the actual research done by others. And yet you get the full patent and keep the drugs expensive and let people die. Fun stuff.

Merrill Goozner's research on this is quite instructive.

io techs and big pharma DEVELOP the medicines . .that is they transform basic research into applicable science, and most importantly we run clinical studies (Ph 1-3) to prove the safety and efficacy of compounds

Ah, right. The clinical studies where you've been caught falsifying the results time and time again. Lovely.

The problem here is in the basic setup. The clinical studies are important for the purpose of safety and efficacy, I agree, but the current system is backwards. First, it's required by the FDA (for good reasons), but it shouldn't be handed over to an obviously biased party such as the drugmaker to handle. If it's required by the gov't it should be handled in some manner by the gov't. David Levine and Michele Boldrin's work here is worth exploring.

These clinical studies are where the risks are - financial and otherwise. Trust me NIH and Universities are not taking this risk on. So for taking on this risk we should be compensated.

The costs here are exaggerated greatly (Goozner's work again). And, I'm sorry, but "for taking on the risk we should be compensated" is NOT a capitalistic attitude. You know damn well that just because you take on risk, you don't get a guaranteed reward. And yet you want a gov't granted monopoly? That's not capitalism at all.

Limiting profit is not a capitalistic notion, and I belive the US is a capitalistic society.

Huh. You need a refresher course. Why not start with Adam Smith, who explained the very basics of free market capitalism, where limiting profit is very MUCH part of it. It's just that the mechanism for doing that is through competition.

What you seem to be in favor of is the gov't blocking competition, so that a single party gets monopoly rents. That's not capitalism at all. That's disgusting.

Look it seems to me that for some reason you have an emotional beef with Biotech/Big Pharma which I won't be able to solve here

Oh good heavens no. I'm a huge fan of biotech and drug development. I have many friends and family who work in the industry. I just think that it shouldn't be based on artificial anti-free market limitations.

Someday you, a friend or a family member will need a medicine and I suspect, that day you'll be glad that the innovators in BioTech and Big Pharma exist.

As I said, I'm quite happy with the output. I just think the business model is screwed up. I recognize that your salary is paid out of abusing the system to gain monopoly rents, and as the famous saying goes "It is difficult to get a man to understand something when his job depends on not understanding it."

But I would argue that the healthcare situation would be significantly better for more people if we stopped limiting it with artificial restrictions and created a real free market.